Beacon Power Corp. (NSDQ: BCON), a developer of flywheels for energy storage that's seen some setbacks, said Monday that it planned to raise about $4.1 million after expenses in a sale of stock and warrants to fund manufacturing and continue development of its first energy storage project in New England.

Beacon said it expected to sell by Wednesday about 8.9 million units for 50 cents each. The units will consist of one share of the company's common stock at a par value of 1 cent per share and one warrant to purchase one share of common stock at 74 cents per share.

Beacon's stock has fallen from more than $2 per share this summer to less than $1 per share in the past two months. The company had $10.6 million in cash and cash equivalents and $6.5 million in working capital as of Sept. 30, and has raised an additional $10.7 million after that date, it reported last month.

Beacon, which last month posted a third-quarter 2008 loss of $5.6 million on revenues of $4,000, compared to a loss of $2.8 million on revenues of $373,000 in the same quarter last year, has scaled back its New England project recently.

The Tyngsboro, Mass.-based company said last month that it started receiving its first revenues from the 1-megawatt pilot project with ISO New England, which manages electrical transmission in the region.

But Beacon also said last month that the project, housed in its headquarters, would be scaled back from the originally planned 5 megawatts by years end to 3 megawatts. The project is still expected to reach 5 megawatts by the first quarter of next year, the company said.

The project is meant to provide frequency regulation services to keep grid power at its optimum frequency, an estimated $2 billion market Beacon is targeting that's a smaller part of the overall market for energy storage.

Beacon has had some rough patches in developing its flywheel technology, which competes with batteries and other energy storage systems. In 2006, it suffered a test malfunction that led to delays as the company sought to correct the problem (see Beacon Picks Up Speed).

Other flywheel developers include Active Power Inc. and Pentadyne Power Corp., which are targeting the broader energy storage market. Beacon has said it also intends to target that market, which includes providing an alternative to generators for backup power for data centers, hospitals and other operations that can't afford to lose power even for a short time.

Beacon is seeking a loan guarantee from the U.S. Department of Energy to build a 20-megawatt frequency regulation plant in Stephentown, N.Y.

The Quercus Trust owned about 6.2 million shares of Beacon as of November. But earlier this month, the investment firm reported to the U.S. Securities and Exchange Commission that it was selling about 393,500 shares at prices between 56 cents and 59 cents per share, reducing its holdings in Beacon to about 4.8 million shares.